Nintendo's Decision On E3 Keynote Is Penny Wise, Pound Foolish

Last night, Nintendo surprised fans and pundits with a startling announcement. At June's Electronic Entertainment Expo, there will be no grand display on the stage of the Nokia Theatre. The live orchestra will not be returning, and Shigeru Miyamoto will not magically pull a Pikmin from his pocket in front of hundreds of onlookers.

Nintendo is trading up the pomp and circumstance of a stage presentation with opportunities both intimate and focused. Make no mistake. Nintendo is saving a lot of money by eschewing the traditional E3 keynote format for smaller, more targeted events.

The news that the company is drastically shifting its approach to North America's largest video game trade show came just hours after further financial troubles were revealed. It's hard to believe that the significant shortfall in operating income (even when considering the modest net surplus) didn't have something to do with this decision. But peel the numbers back and you'll find the reason that spending on the grandeur of a keynote are exactly what Nintendo should be doing.

Sales missed expectations. Furthermore, it's troubling that there is no qualification to my previous statement. The 3DS is a success, but Nintendo has failed to reach its 15 million unit target. The Wii U is drastically underperforming, missing even the reduced expectation of five million units sold globally by more than one million.

Nintendo cites poor communication and a failure to reach the non-traditional video game consumers that bought the Wii. The same families that waited in lines and called every retailer desperate for a Wii for nearly a year are the same ones that have no idea what the Wii U offers them.

These are the people who don't read Game Informer or other video game publications. These are the families that have never heard of Nintendo Direct. These are the parents and grandparents that hear about video games from traditional, mainstream news sources; the same outlets that normally help fill the seats in the Nokia Theatre.

The Nintendo Direct presentations that complemented the E3 2012 keynote and floor presentations were fantastic for fans. They provided a depth of information that diehards craved. This year's Nintendo Direct shows will not reach the average Wii owner. They will not be useful in increasing the limping sales numbers. They will not replace the expensive stage presentation.

Nintendo will no doubt have its least expensive E3 in years. The company is correct to recognize that Microsoft and Sony are going to attract a lot of attention with new hardware. Right now though, Nintendo needs to stand tall, show off an enormous, buzz-creating lineup of first-party software, and hook people who have been sitting on the fence since November. A surprise announcement from third-party publishers offering renewed support would be enormously beneficial, but based on statements from EA and Deep Silver (to name a few), that isn't likely.

It's not too late for Nintendo to incorporate tactics that bring in new consumers. If the strategy is exclusively focused on the base, though, the savings recaptured from this strategy shift won't be enough to create the momentum company president Satoru Iwata needs to reach his goal of 100 billion yen operating income.